Enough Already: Money For Nothing
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a blogumn by Jordan Weeks
“Interesting way to undermine a society, I think, is to take some of their money away.”
–Kurt Vonnegut, Jr.
So AIG (American International Group, Inc., NYSE) is again all over every news outlet because their executives decided to pay out contractual bonuses totaling something like $165 million to some of their traders. The “problem” is that that $165 million is coming from the federal bail-out money the company received, which I believe is somewhere around the $170 billion range. Even since I started writing this last Thursday, there have been “Breaking-News” updates on CNN regarding the AIG hearings in Washington. It’s too much.
I don’t know SHIT about the finer-points of ANY of this AIG (American International Group, Inc.) bail-out debacle. I’m not an economist by any stretch of the imagination. But this kind of government involvement in private industry, in the private-sector’s commerce, is highly alarming, completely un-Constitutional and the antithesis of every principle upon which this country’s government was founded.
AIG got this total bail-out of, what, $170 billion? And people – including Obama, allegedly – are upset that these AIG jerks are using some $165 million of that bail-out money to pay previously promised (contracted) bonuses to the company’s higher-ups. And right they are to be upset. But I’d like to address a few things here before everybody’s noses get all out-of-joint about where the already-given $170 billion is going.
First: $165 million isn’t much more than a drop in AIG’s $170 billion bail-out bucket.
Second: after the government gives a private company money (which they should NOT be doing in a laissez-faire capitalist economy such as ours), they really can’t tell the private company what to DO with the money; they have GIVEN it to that company, the managers of whom could flush it right down the fucking toilet, if they so desired, since it’s now their money. (Which, by the way, is pretty much what they ARE doing.)
Third: You know what would’ve made it really difficult (some might say almost impossible) for AIG’s money-bunglers to get $165 million in bonus pay-outs? If AIG had gotten NO federal bail-out money AT ALL. Not $170 billion; not $20 billion. NOTHING.
I don’t understand Obama (or whomever’s controlling these huge federal-money decisions) approving this bail-out in the first place, but then disapproving of how the dispensed funds are being spent. It’s bad enough that the Obama camp doesn’t understand (or agree) that these businesses shouldn’t be getting ANY kind of federal money – because they’re PRIVATE BUSINESSES! – but then they want to have a say in where that money goes after they’ve given it away to a private-sector company? This doesn’t even make SENSE. It’s bordering on being intellectually unprocessable. The bottom-line (and what MAKES this so confounding) is that in a capitalist society, the federal government does not give money to private industry. It just DOESN’T. So the bail-outs should never have happened. The fact that they did is what makes the rest of this so difficult to piece together.
It’s my understanding that if a company, even a gigantic company – whether it’s an insurance company, a bank, a car manufacturer, or a friggin’ coffee-shop franchise – gets to a point where folding, declaring bankruptcy, is its only option as a result of either unscrupulous, risky, or outright illegal financial mishandling, or as a result of honest-to-goodness “bad business” (no customers, etc.), then that’s that. If a business fails, it fails. And in such a case, it is my laymen’s understanding that someone else would just start ANOTHER business to fill the void left by the folded business. One giant bank goes out of business – let’s say, because they’ve given absurd loan amounts to people or businesses that would never in a million years be able to pay them back – and another one, a brand-new one, OPENS. That’s the cycle of business in a capitalist society.
It seems that that’s exactly what would have happened if there WERE no federal bail-outs of these companies, if they were just left to flounder, fold, and close. No federal bail-out of $170 billion given to AIG last month; no $700 billion (for Chrissake!) overall given to companies last fall. But apparently someone – or a group of people – doesn’t want that natural economic course to come to fruition. In giving these unconscionably huge amounts of money to companies that should by all rights fail and close, thus leaving room for new companies to begin and grow, the federal government is preventing this from happening – preventing the birth and growth of new businesses, preventing the natural course of capitalism. WHY they are doing this completely eludes me. I have absolutely no idea, no clue, nothing approaching a clue. Why would a government completely undermine, completely subvert the economic system upon which it is based, upon which its SUCCESS is based?
Again, I haven’t a clue. Not a crap-smacking clue. But I don’t like it one fucking bit.
Brace yourselves…?
Good luck, everybody.
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great post. here's more on the subject from rolling stone:
http://www.rollingstone.com/politics/story/267939…
great post. here's more on the subject from rolling stone:
http://www.rollingstone.com/politics/story/267939…
This is an interesting article, Jordan, b/c I tend to think of everything from business to politics in the same way that I think of interpersonal relationships. It's my personal policy that there is nothing such as a loan, even if a person promises to pay you back. All money loaned should be considered a gift on the loaner's part, and if the loaner can't survive w/o getting that money back, then s/he shouldn't loan it under any circumstances. If the loanee spends that money in a way that you think is unwise, then you shouldn't loan that person money again, but you can't backseat drive on a loan. And if that person promises to pay you back, but doesn't, then you can feel free to never loan that person money again guilt-free. I considered unpaid loans a gift, b/c then I know I won't have to deal with having to loan that person money ever again.
Like you, I'm still unclear about how this stimulus package works. Some of it seems to be loans, some of it seems to be cash infusions.
But from the little I do know, I think that it was okay for the government to give AIG money in the first place. After all, I've gotten money from the bank and other lenders to buy cars and go to college. In grad school, I could have used my loan money to party in Peru or flushed it down the toilet, the student loan people couldn't police how I spent it — but I would've had to pay it back no matter what I did with it. Unless I died.
So it looks to me like the government is loaning and gifting our money to certain entities. They're free to do that as they're entrusted with that power.
However, if the AIG money is a gift, then it's obvious that the American people feel that they are spending those gifts unwisely. Therefore, AIG and other banks of its ilk probably shouldn't get any more bailout money.
I feel what is missing in the stimulus package is accountability and terms. If the money is to be directed towards something specific — as with me and my schooling — then we need to say that. Then if the banks violate those terms, we have some ground to stand on.
I think the American people think we're angry because the Richie-Riches are getting away with murder. And that's certainly part of it. But I think we're more angry b/c we have no clear idea of what is actually going on. Between murky loan/gift transactions and political double speak, it's become impossible for anybody but economists to understand exactly what's happening with these bailouts, and I think that's why we're in dangerous territory right now.
Yeah – I don't know about this. Especially concerning the gov't being "entrusted with the power…to loan and gift our money to certain entities". I don't think they are. I believe they're allowed and expected (and entrusted with the power) to portion money to federal programs – social security, medicaid, etc. – but I don't know that the gov't is actually supposed to be doling tax-payer money out to private companies, legally speaking. Constitutionally speaking they are CERTAINLY not supposed to be doing this. It's possible that by some loophole they're allowed to – and, indeed, they ARE doing that, so it probably is technically legal. But that would have to be the result of some fancy legal-work over the last fifty or hundred years; some kind of Keynesian allowance or excuse, like, "Yes – keep spending money, and eventually everyone will have more of it…"
But, as you pointed-out, it is OUR money, and since ours is Constitutionally promised to be a government for the people BY the people, I think the only real way to have approached this (bail-out crap) situation would have been by a nation-wide popular vote. "There's no time for that," some would certainly have assessed. And if that were the case, then the gov't should've erred on the side of Constitutionality and not given ANY bail-out money.
The gov't's job is to uphold rule of law, to keep us safe physically / militarily, and, arguably, otherwise to do as we see fit (by popular-majority vote). Maintaining economic solvency, or maintaining economic flow may fall into the latter category there. Regardless, the economic maintenance, or even economic success, of the country does not hinge upon the success or failure of a single private business, or even a slew of private businesses. Therefore it is beyond irresponsible for the gov't to have put so much of its energy and money (again, OUR money) into preventing a company like AIG from dissolving.
I guess this is just a matter of differences of opinion, unless discussion participants are dedicated, hardcore economists. But if the gov't had put this to a vote, laid-out the situation and asked you and me and everyone for whom they WORK (!) to vote whether or not AIG should get $180 billion to stay in business, or that a handful of companies should receive a total of, what?, $800 billion to stay in business – PRIVATE BUSINESSES, whose interests involve only their customers and the people who work for / at said companies – would you have voted in favor of such a move? I sure as shit would not have.
Maybe I'm over-simplifying this, but it seems that that's what this all comes down to: the gov't doing something that the majority of the people don't want it to do, and using their money to do it (which is only going to SERVE the recession / depression, to deepen and prolong it, as are the ongoing financial burdens of maintaining military presence in Iraq, something else with which the majority of U.S. citizens are now also in strong opposition). And with a representational gov't such as ours, that shouldn't be happening. Certainly not with the frequency and intensity with which it's been happening over the last 6 – 12 months.
This is an interesting article, Jordan, b/c I tend to think of everything from business to politics in the same way that I think of interpersonal relationships. It's my personal policy that there is nothing such as a loan, even if a person promises to pay you back. All money loaned should be considered a gift on the loaner's part, and if the loaner can't survive w/o getting that money back, then s/he shouldn't loan it under any circumstances. If the loanee spends that money in a way that you think is unwise, then you shouldn't loan that person money again, but you can't backseat drive on a loan. And if that person promises to pay you back, but doesn't, then you can feel free to never loan that person money again guilt-free. I considered unpaid loans a gift, b/c then I know I won't have to deal with having to loan that person money ever again.
Like you, I'm still unclear about how this stimulus package works. Some of it seems to be loans, some of it seems to be cash infusions.
But from the little I do know, I think that it was okay for the government to give AIG money in the first place. After all, I've gotten money from the bank and other lenders to buy cars and go to college. In grad school, I could have used my loan money to party in Peru or flushed it down the toilet, the student loan people couldn't police how I spent it — but I would've had to pay it back no matter what I did with it. Unless I died.
So it looks to me like the government is loaning and gifting our money to certain entities. They're free to do that as they're entrusted with that power.
However, if the AIG money is a gift, then it's obvious that the American people feel that they are spending those gifts unwisely. Therefore, AIG and other banks of its ilk probably shouldn't get any more bailout money.
I feel what is missing in the stimulus package is accountability and terms. If the money is to be directed towards something specific — as with me and my schooling — then we need to say that. Then if the banks violate those terms, we have some ground to stand on.
I think the American people think we're angry because the Richie-Riches are getting away with murder. And that's certainly part of it. But I think we're more angry b/c we have no clear idea of what is actually going on. Between murky loan/gift transactions and political double speak, it's become impossible for anybody but economists to understand exactly what's happening with these bailouts, and I think that's why we're in dangerous territory right now.
Yeah – I don't know about this. Especially concerning the gov't being "entrusted with the power…to loan and gift our money to certain entities". I don't think they are. I believe they're allowed and expected (and entrusted with the power) to portion money to federal programs – social security, medicaid, etc. – but I don't know that the gov't is actually supposed to be doling tax-payer money out to private companies, legally speaking. Constitutionally speaking they are CERTAINLY not supposed to be doing this. It's possible that by some loophole they're allowed to – and, indeed, they ARE doing that, so it probably is technically legal. But that would have to be the result of some fancy legal-work over the last fifty or hundred years; some kind of Keynesian allowance or excuse, like, "Yes – keep spending money, and eventually everyone will have more of it…"
But, as you pointed-out, it is OUR money, and since ours is Constitutionally promised to be a government for the people BY the people, I think the only real way to have approached this (bail-out crap) situation would have been by a nation-wide popular vote. "There's no time for that," some would certainly have assessed. And if that were the case, then the gov't should've erred on the side of Constitutionality and not given ANY bail-out money.
The gov't's job is to uphold rule of law, to keep us safe physically / militarily, and, arguably, otherwise to do as we see fit (by popular-majority vote). Maintaining economic solvency, or maintaining economic flow may fall into the latter category there. Regardless, the economic maintenance, or even economic success, of the country does not hinge upon the success or failure of a single private business, or even a slew of private businesses. Therefore it is beyond irresponsible for the gov't to have put so much of its energy and money (again, OUR money) into preventing a company like AIG from dissolving.
I guess this is just a matter of differences of opinion, unless discussion participants are dedicated, hardcore economists. But if the gov't had put this to a vote, laid-out the situation and asked you and me and everyone for whom they WORK (!) to vote whether or not AIG should get $180 billion to stay in business, or that a handful of companies should receive a total of, what?, $800 billion to stay in business – PRIVATE BUSINESSES, whose interests involve only their customers and the people who work for / at said companies – would you have voted in favor of such a move? I sure as shit would not have.
Maybe I'm over-simplifying this, but it seems that that's what this all comes down to: the gov't doing something that the majority of the people don't want it to do, and using their money to do it (which is only going to SERVE the recession / depression, to deepen and prolong it, as are the ongoing financial burdens of maintaining military presence in Iraq, something else with which the majority of U.S. citizens are now also in strong opposition). And with a representational gov't such as ours, that shouldn't be happening. Certainly not with the frequency and intensity with which it's been happening over the last 6 – 12 months.
Nice post and comments.
Nice post and comments.